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The National Credit Regulator

South African consumers are now protected from reckless lending, high interest rates and unfair lending practices in the credit industry through a new regulatory entity, the National Credit Regulator (NCR) which came into existence on 1 June 2006.
The new institution is established in terms of the National Credit Act No. 34 of 2005, which was signed into law by President Thabo Mbeki on March 15 2006.

The legislation was introduced and adopted by the National Assembly during 2005. In addressing the National Assembly on the National Credit Bill during October 2005, Minister Mandisi Mpahlwa described the role of the Regulator as follows: "The National Credit Regulator will play a vital role in ensuring enforcement and promotion of access to redress. The National Credit Regulator is established to ensure proper implementation of the provisions of the Bill, for without the required resources and mechanisms to enforce the provisions, the Bill will be ineffective and redundant."

The purpose of the National Credit Act is to promote a credit market that is fair, transparent, accessible and responsible. It also aims to promote a market that is competitive and sustainable. However, the overriding objective of the Act is to protect consumers. It specifically prohibits practices such as reckless lending and automatic increases in credit limits, and regulates interest and fees. The Act covers all forms of consumer credit, including bank loans, credit cards, store cards, pawn transactions, furniture finance and motor vehicle finance.

The Act empowers the Regulator to also deal with any contraventions on existing loan and credit agreements. Although the National Credit Act replaces the Usury Act and Credit Agreements Act, the Regulator will be able to assist consumers with problems that fall under these previous Acts, and to investigate complaints that fall under these Acts.
The National Credit Regulator is created to enforce the Act and to regulate credit providers, credit bureaus and debt counsellors. It further receives and investigates complaints, and educates consumers of their rights under The Act.
On 5 April 2006, Cabinet approved the appointment of Gabriel Davel, a former partner with auditing firm Deloitte & Touche, as the first CEO of the NCR. "Loan agreements are frequently complex and difficult to understand, with many of the fees and obligations hidden in the fine print. The vulnerability of people that have become so used to being rejected by credit providers is frequently exploited."

Davel says the credit industry has been too willing to participate in this credit frenzy: "More honest disclosure by both the credit provider and consumers, and harsh penalties on credit providers that approve loan applications knowing that clients cannot afford the repayments, would help in creating an environment in which people can benefit from access to credit, without being damaged by credit".

According to Davel, the immediate challenge to the National Credit Regulator is to create capacity within the regulator, to get credit providers registered and to be able to deal with complaints from borrowers. He added that it is a priority to engage with the banks, retailers and others, to establish a constructive and effective working relationship between the regulator and the institutions that are affected by the Act.

The new consumer credit legislation seeks;

  • To make the credit market function more cost effective and competitive by promoting a fair, competitive and sustainable credit market;

  • To ensure that increased access to credit will not lead to over indebtedness;

  • To ensure protection for consumers and secure redress for unacceptable practices

  • To ensure compliance with regulatory requirements; and

  • To provide for necessary cooperation between national and provincial government as well as industry, consumer's protection agencies to ensure a coherent and integrated regulatory framework.